This is a study of Health Maintenance Organizations (IBIOs) as economic units. The broad goal is to explore how variations in the quality of services provided by HMOs affect the cost of providing service to their members. It is hypothesized that higher levels of quality will be more costly to produce, but that there may be financial paybacks to organizations that make ongoing investments in service quality. It is also hypothesized that different types of quality measures (process, structure, and outcome measures) may have different levels of importance in HMO costs. These research goals will be pursued-by estimating a quality-adjusted HMO cost function which will also be adjusted for case-mix... A national data set of HMO financial data assembled by HCIA and Healthplan Employers Data Information Set (IEDIS) quality measures supplied by the National Committee for Quality Assurance are the principal data sources to be employed in estimating the HMO cost function. Results of the study should provide important information about the economic role of quality in the HMO industry and insight into the economic significance of different types of quality measures. More generally, this study should provide insights into the economic role of quality in all types of healthcare production.